Asian Markets Move Higher For a Third Day
By Jonathan Burgos
July 16 (Bloomberg) — Asian stocks rose for a third day, led by automakers and mining companies, after U.S. manufacturing gauges improved, the yen weakened and commodities prices climbed.
Toyota Motor Corp., which gets 31 percent of sales from North America, gained 2 percent. Komatsu Ltd., the world’s No. 2 maker of earthmoving equipment, jumped 3.8 percent. BHP Billiton Ltd., the world’s largest mining company, rose 2 percent. Canon Inc., the world’s largest camera maker, climbed 3.3 percent after the Nikkei newspaper reported earnings will rise.
“A rebound in the economy won’t be very fast but we don’t have to be too pessimistic in that the situation is getting better,” said Mitsushige Akino, who oversees the equivalent of $522 million at Ichiyoshi Investment Management Co. “I’m expecting relatively good earnings reports from companies because they have finished clearing inventories.”
The MSCI Asia Pacific Index advanced 1.5 percent to 103.03 as of 10:09 a.m. in Tokyo, taking its three-day gain to 5.1 percent. The gauge has rallied 46 percent from a more than five- year low on March 9 amid optimism government stimulus policies around the world will revive the global economy.
Japan’s Nikkei 225 Stock Average jumped 2.2 percent to 9,476.92. South Korea’s Kospi Index gained 1 percent and Australia’s S&P/ASX 200 Indexfutures rose 2 percent. New Zealand’s NZX 50 Index added 1.1 percent.
Futures on Standard & Poor’s 500 Index lost 0.4 percent as lender CIT Group Inc. said it probably won’t receive a federal bailout. The S&P 500 climbed 3 percent in New York yesterday after Federal Reserve figures showed industrial production shrank 0.4 percent last month, the least in eight months. The New York Fed’s Empire Index rose to minus 0.6 this month, the highest level since April 2008.
Copper, Oil
Optimism the expansion of manufacturing will boost demand for materials lifted prices for copper and oil. Copper futures leapt 4.1 percent in New York, the most since June 9. Crude oil jumped 3.4 percent, the steepest climb since June 23…..
By Bloomberg News
July 16 (Bloomberg) — China’s economy rebounded from its weakest growth in almost a decade as record lending and surging investment countered a slump in exports.
Gross domestic product expanded 7.9 percent in the second quarter from a year earlier after a 6.1 percent gain in the previous three months, the statistics bureau said in Beijing today. That was more than the 7.8 percent median estimate of 20 economists surveyed by Bloomberg News.
China’s 4 trillion yuan ($585 billion) stimulus package and the scrapping of lending restrictions for banks triggered the revival in the world’s third-largest economy. The nation risks bubbles in stocks and property after money supply grew by a record and inflows of cash pushed foreign-exchange reserves to more than $2 trillion.
“China’s recovery is on track and growth may accelerate to near 9 percent in the third quarter and 10 percent in the fourth quarter,” said Lu Ting, an economist at Bank of America-Merrill Lynch in Hong Kong. “The government won’t tighten policies too early but it should tell banks not to lend without limit.”
The central bank is using bill sales to drain cash from the financial system and push up money-market rates, seeking to tighten monetary policy without choking off a recovery. One-year lending rates and banks’ reserve requirements haven’t changed this year after reductions in 2008 to counter the global crisis.
The government may refrain from “drastic” policy shifts until a recovery is better established, Lu said.
Surging Investment
The rebound in GDP snaps a two-year run of progressively slower growth. Investment in factories, property and roads surged 35.3 percent in June from a year earlier, quicker than the 33.6 percent pace for the first half as a whole, the statistics bureau said…..
Prudential Resumes Talks On Japan’s AIG Unit
By Komaki Ito and Zachary R. Mider
July 16 (Bloomberg) — Prudential Financial Inc. resumed talks with American International Group Inc. over the purchase of two Japanese insurance units after discussions stalled earlier this year, said two people briefed on the situation.
A sale of AIG’s Star Life and Edison Life operations may yield more than $3 billion, said one of the people, who declined to be identified because the talks are private. A rival bid for the units from Manulife Financial Corp. is no longer under active discussion, the person said.
Prudential Chief Executive Officer John Strangfeld, in his second year at the helm, said in May he was looking for “opportunistic acquisitions” as the financial crisis forces rivals to scale back. Prudential, the second-largest U.S. life insurer, declined U.S. bailout cash and raised $2.4 billion from private investors in June sales of stock and debt.
“We are not simply hunkering down and riding this out,” Strangfeld said of the economic slump at the company’s annual meeting on May 12. “Our aspiration is to gain ground while our competitors are distracted or compromised.”
Prudential and AIG aren’t close to reaching an agreement on a transaction, and the talks could fall apart, one of the people said, speaking on condition of anonymity. Lauren Day, a spokeswoman for New York-based AIG, declined to comment, as did Robert DeFillippo of Prudential in Newark, New Jersey, and Laurie Lupton of Toronto-based Manulife.
Biggest AIG Sale
For AIG, a sale of the Japanese businesses could represent the biggest transaction since the firm almost collapsed in September and was rescued with a U.S. government bailout that now totals $182.5 billion….
Japan’s Unemployment Rises As The Service Sector Sees a Slowdown
By Toru Fujioka
July 16 (Bloomberg) — Japan’s demand for services unexpectedly dropped in May as an unemployment rate at a five- year high discouraged households from spending.
The tertiary index, a gauge of money households and businesses spend on phone calls, power and transportation, fell 0.1 percent from April, when it rose 2.2 percent, the Trade Ministry said today in Tokyo. The median estimate of 20 economists surveyed by Bloomberg News was for a 0.4 percent gain.
Declining profits are forcing companies cut costs and fire workers, which pushed the jobless rate to 5.2 percent in May. The Bank of Japan yesterday cut its growth forecast for the year ending March 31 and said consumer spending “remains generally weak.”
“The job and income environment remains severe,” said Kyohei Morita, chief economist at Barclays Capital in Tokyo. “They will keep suffering from cost cuts.”
The yen traded at 94.26 per dollar at 8:57 a.m. in Tokyo from 94.32 before the report was published.
IMF Urges Japan To Give More Stimulus If Needed
By Sandrine Rastello and Lily Nonomiya
July 16 (Bloomberg) — The Japanese government and central bank should be ready to provide additional stimulus measures should global demand fail to improve enough to underpin a recovery, the International Monetary Fund said.
“There are downside risks, particularly if export demand continues to remain weak and unemployment starts to weaken consumption further,” Jim Gordon, the IMF mission chief to Japan, said yesterday. “This emphasizes the importance of monetary policy, fiscal policy and financial sector policy to remain supportive with additional measures” if the outlook deteriorates, he said.
Prime Minister Taro Aso has pledged 25 trillion yen ($260 billion) to revive an economy in its deepest recession since 1945. The Bank of Japan, which has lowered its benchmark interest rate to 0.1 percent, bought government and corporate debt and provided banks with unlimited loans, said hours before the IMF report that yesterday’s expansion of its emergency- credit program to December may be the last.
“We decided to extend the measures by three months this time, rather than six months, because financial conditions are improving and we expect this improvement to continue,” the bank’s governor Masaaki Shirakawa said in Tokyo after the decision. “If this situation develops further, we will end” the programs, he said.
Commenting on the policies of Japan’s central bank, the IMF in a report said that most directors “supported additional credit easing measures should downside risks materialize or financial stresses resurface, while minimizing risks to the Bank of Japan’s balance sheet.”
Growth in 2010….
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